China's trade surplus hits record high in July

China's trade surplus hit a record high in July, providing the world's second-largest economy with some much needed support.

China's trade balance rose to $101.0bn last month, with exports growing 18% year-on-year in dollar terms - ahead of expectations for a 14.1% gain.

The Asian nation's strength in exports was principally driven by vehicles, steel products, and textile-related products, with automobile exports surging 64% year-on-year and 21.2% month-on-month.

However, imports rose by 2.3% in July, compared with a 1% gain in June and lower than estimates for an increase of 4%, while besides an uptick in crude imports, inbound shipments of commodities, such as soybeans, natural gas and copper, all declined on a monthly basis.

Economists also warned that China's strength going forward throughout the rest of 2022 will largely depend on whether or not domestic demand can fill the void left by an export surge that likely won't last forever.

CMC Markets' Michael Hewson said: "The latest China trade numbers would appear to in some part support concerns about the economic outlook. While exports have continued to recover, jumping to 18% in July, and beating expectations after a weak Q2, pushing the trade surplus ever higher, imports are still struggling. These rose by 2.3%, up from 1% in June, and below expectations of a 4% rise. This lack of impetus is being held by a lack of confidence on the part of Chinese consumers, as well as a slowdown in the property sector.

"The Chinese government already appears to have thrown in the towel on its 5.5% GDP target, with reports last week saying that it should now be considered a guide. In reality, the target has been wishful thinking since April when Shanghai, as well as most of the country, was locked down as Covid rippled out across the country. With little sign that Chinese authorities are prepared to ease up on their zero-covid approach in the second half of this year, it's highly likely that domestic demand will probably remain weak."

Reporting by Iain Gilbert at Sharecast.com